Trump’s 50% tariffs on India take effect: Industry analysts warn of fallout as export hubs brace for pain; trade deal still in limbo— key takeaways

NEW DELHI: The additional 25 per cent tariff imposed by US President Donald Trump on Indian goods over New Delhi’s purchases of Russian oil have come into effect, raising the overall levy on exports to 50 per cent.Trump had first announced reciprocal tariffs of 25 per cent on India from August 7, alongside similar levies on about 70 other countries. He later doubled tariffs on Indian goods to 50 per cent, citing Russian crude imports, but allowed a 21-day window for negotiations.

Who'll pay the price?

Several sectors, including textiles and apparels, gems and jewellery, seafood (primarily shrimp), and leather goods, are set to be affected by the newly imposed tariffs. The Indian pharmaceutical industry, a crucial supplier of generic drugs to the US, along with electronics and smartphones, including Apple iPhones, have been exempted from the tariffs. While some of the tariff costs may be absorbed by Indian exporters through price reductions and US importers by incurring higher expenses, the tariffs are expected to render Indian exports less competitive compared to exporters from neighbouring countries that face tariffs in the 10–25 percent range.

The resulting decline in orders from the US, India's largest market for these products, is anticipated to adversely impact hundreds of MSMEs (micro, small and medium enterprises), leading to layoffs and increased unemployment.

Exemptions and transit Clause

Indian products already “loaded on a ship and in transit” to the US before the August 27 deadline will be exempt from the additional 25 per cent duty, provided they are cleared for consumption by September 17, 2025, and importers declare the special code HTSUS 9903.01.85 to US Customs, DHS said.

FIEO sounds alarm as US tariffs bite

Apex exporters body Federation of Indian Export Organisations (FIEO) on Tuesday had warned that steep US tariffs have forced textile and apparel manufacturers in Tirupur, Noida, and Surat to halt production, reported PTI.President S C Ralhan said about $47–48 billion worth of India’s exports to the US now face 30–35 per cent cost disadvantages, making them uncompetitive against rivals from Vietnam, Bangladesh and China.

Labour-intensive sectors like leather, shrimp and handicrafts are also at risk.He urged immediate support through cheaper credit, loan moratoriums, and faster trade deals, while stressing urgent diplomatic engagement with Washington.Also read: Indian refiners unlikely to stop Russia crude oil trade under US pressure

India’s stays firm

The government has ruled out retaliation but is preparing measures to cushion exporters from the 50% US tariffs. Senior officials told ET that a Rs 25,000-crore Export Promotion Mission is under consideration, covering trade finance, SEZ reforms, warehousing, ecommerce hubs, and “Brand India” promotion. Commerce minister Piyush Goyal said India will protect domestic interests through GST tweaks to boost demand in sectors like textiles and food processing, while also diversifying trade ties with other economies.Also read: India prepares multi-pronged strategy to shield economy; details hereEarlier, on Monday, Prime Minister Narendra Modi had said he could not compromise on the interests of farmers, cattle-rearers, and small-scale industries. “Pressure on us may increase, but we will bear it,” he asserted. India had described the US move as “unjustified and unreasonable.”

Experts call it a ‘lose-lose’

Trade experts warned the escalation risks damaging both economies. Mark Linscott, Senior Advisor with The Asia Group, was quoted by that “unfortunately", the US and India have managed to convert what appeared to be a true and unprecedented win-win on trade into a "remarkable lose-lose.”"Hopefully, we will find a way to conclude a satisfactory mutually beneficial Free Trade Agreement with the United States early rather than late and that would certainly take us to the next step of the visit of President Trump to India," said former foreign secretary and Rajya Sabha MP Harsh Vardhan Shringla.Meanwhile, Raj Manek, Executive Director and Board Member of Messe Frankfurt Asia Holdings Ltd stated India must intensify its focus on innovation and sustainability to achieve its $100 billion target in textiles. He stressed that investment in man-made fibres (MMF) and performance fabrics would be critical at this stage. “Over 60 per cent of global fibre consumption is now in MMF. With the PLI scheme targeting MMF apparel and technical textiles, India is well-positioned to build scale and future-ready capacity,” Manek said after the conclusion of the 13th edition of Gartex Texprocess India, a tradeshow on garment and textile machinery held in the capital, as reported by ET. He added, “At the same time, adopting energy-efficient machinery, managing effluents effectively, and converting waste into value will help meet ESG expectations while lowering costs.”

Blow to the US too?

The tariff shock is also expected to hit the American economy. According to a report by the State Bank of India (SBI), US GDP could be shaved by 40–50 basis points, while inflationary pressures are likely to rise due to higher input costs and a weaker dollar.Also read: 50% tariffs on India to blowback on Trump? US GDP could shrink 40–50 bps, inflation to flare “We believe that US tariffs are likely to affect US GDP by 40–50 bps along with higher input cost inflation,” the SBI report noted. Import-sensitive sectors such as electronics, automobiles, and consumer durables are already feeling the strain. The report added that US inflation is expected to remain above the Federal Reserve’s 2 per cent target through 2026, driven by tariff pass-through and currency effects.

Trade deal still in limbo

Talks on a bilateral trade agreement (BTA) between India and the US have stalled, with the American delegation having postponed its scheduled August 25 visit to New Delhi.US Treasury Secretary Scott Bessent has accused India of “profiteering” by reselling Russian oil, while trade talks between the two sides remain on “thin ice,” according to experts. Analysts warn that unless Prime Minister Modi and President Trump engage directly, chances of reviving the deal remain slim. The deadlock raises uncertainty for exporters, who had earlier hoped for tariff relief through a limited trade pact.